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The Determinants of U. S. State Economic Growth: A Less Extreme Bounds Analysis

This study investigates U.S. state economic growth from 1970-1999. I innovate on previous studies by developing a new approach for addressing "model uncertainty" issues associated with estimating growth equations. My approach borrows from the "extreme bounds analysis" (EBA) approach of Leamer (1985), while also addressing concerns raised by Granger and Uhlig (1990), Salai-Martin (1997) and others that not all specifications are equally likely to be true. I then apply this approach to identify "robust" determinants of state economic growth. My analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state's economy. I also find that policy variables such as (i) size and structure of government and (ii) taxation are "robust" and economically important determinants of state economic growth.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0605.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 06/05.

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Length: 51 pages
Date of creation: 02 Feb 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/05
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